The coffee franchise business model is becoming a powerful wave sweeping across the United States. Faced with such a fiercely competitive market, is a coffee franchise really a high-profit startup method with quick capital recovery? Should you venture into a coffee franchise business? In this article, Hello 5 Coffee will provide insights and experience to help you successfully open a coffee franchise.
Benefits of Running a Coffee Franchise
1. Coffee Franchise Model Saves Time and Costs in Building a Brand
It’s fair to say that building a brand is a process that requires a tremendous amount of time, cost, and effort in researching, studying, and analyzing the market, planning, or developing a menu… Not to mention that if you’re a newcomer without the support of an experienced partner, it’s very difficult to overcome the competition in a market as vast as the coffee industry. Therefore, the coffee franchise business model will bring clear advantages in utilizing a brand that has already proven successful. Franchise owners don’t need to spend money on promoting and developing a new brand, but only need to leverage the existing brand in a way that aligns with common goals and the agreements made between both parties.
2. Access to an Existing Customer Base
When purchasing a coffee franchise, besides saving time and costs in building a brand, your store will benefit from the existing customer base of the parent company. These are all customers who already know and trust the quality, service, and experience they expect. Having a loyal customer base helps franchise owners somewhat reduce the difficulties and risks when running a coffee shop, thereby bringing higher efficiency and profits to the business.
3. Quick and Efficient Operating Procedures for Coffee Franchise Model
The operating procedures of coffee shops will be fully consulted by the franchisor in an optimal and professional manner, with in-depth training and education… The franchisee will also receive support with ready-made brewing formulas, standardized menus, equipment, machinery, toolkits, point of sale (POS) systems… Thus, running a business under the coffee franchise model will help franchise owners tightly manage operating procedures, thereby helping the business quickly adapt and maintain stability in the face of market trends, changes, or customer needs.
4. Support for Marketing and Advertising Activities
When opening a franchise coffee shop, store owners will receive support from corporate and parent company campaigns regarding advertising and marketing activities, and will be accompanied in building promotional, marketing, and operational strategies… at the local level. This is one of the very important factors in attracting customers.
5. Coffee Franchise Model Helps Minimize Business Risks
Finally, the advantage of the coffee franchise model is helping to minimize business risks thanks to the support of the parent company with an experienced team. Store owners don’t have to spend much time and money searching for and training new employees, thereby being able to leverage the franchisor’s support to minimize risks related to store operations. Additionally, coffee franchises typically come with support for raw material suppliers. This helps franchisees purchase high-quality products at preferential prices, minimizing risks related to purchasing goods that don’t meet quality standards or aren’t suitable.
Common Risks When Running a Coffee Franchise
1. High Market Competition
With the advantages of simplicity and relatively high profits, the coffee franchise business model has become a rapidly developing field. This also means fierce competition in the market. Let’s look at a typical example: bubble tea shops that once created a craze with franchise stores popping up throughout major U.S. cities. Before the COVID-19 pandemic, many streets had 2-4 bubble tea shops side by side, with franchise chains like Kung Fu Tea, Gong Cha, Tiger Sugar, and others… What’s special is that these brands had hundreds of stores across the country. However, after some time, many of these bubble tea chains faded away, and storefronts once again “changed owners” with new trends. This shows that franchise brands are “blooming” in the United States with the presence of many major international brands, with many winners but also many losers.
2. High Investment Costs
Franchise investments typically bring high returns on investment, but they usually come with quite large investment costs, mostly from franchise fees and royalty fees.
For the franchise business model, a brand will require its own franchise price. However, you need to note that this is only the transfer fee and there will be many other different costs. Below are the basic costs you need to meet:
- Management fees
- Training and consulting fees
- Advertising fees
- Store evaluation fees
- Contract guarantee fees (will be refunded upon expiration)
- Initial purchase of machinery, equipment, and raw materials
- Store interior construction costs according to the parent company’s design (mandatory requirement for all franchise stores to ensure brand identity consistency)
- Monthly royal-fee collection rate (based on revenue percentage)
Typically, for mid-range franchise brands, franchise fees range from $15,000 to $75,000, but they come with lower margins (profit margins). Conversely, for premium franchise brands that can cost $300,000 to $500,000 (like Starbucks or Dunkin’), the margins are quite attractive to investors. Thus, the decision about choosing between managing a coffee chain franchise or running an independent coffee business entirely depends on each investor’s appetite.
3. Potential Risks Regarding Contract Agreements
Coffee franchise business may also face risks regarding agreements or failure to ensure consistency with regulations and terms according to the franchise contract from the beginning.
Let’s examine a failed case study of a major franchise brand in contract disputes. During the process of running a franchise business model, sudden price policy changes from the parent company caused franchise stores to face major competition due to the excessive number of brand stores. Meanwhile, the franchisor had no protection policies and even squeezed investors.
This shows that what investors need to pay attention to when doing business under the franchise model is ensuring consistency in complying with regulations and franchise contracts.
4. Lack of Creativity and Innovation in Business
For the brand franchise model, both the franchisee and franchisor will follow a pre-established business plan. This means you won’t be able to come up with creative ideas for your business but must comply with common regulations regarding store design, logo, menu, brewing formulas, operations, management systems… from the franchisor. This can make the coffee shop lack uniqueness, fail to create its own impression, and attract customers.
Read more: Should I open a Vietnamese coffee shop in the US?
5. Operational System Risks
One of the biggest risks of the coffee franchise business model relates to the operational system. One thing that’s easy to see is that the franchisee’s success depends greatly on the parent brand. This causes franchise outlets to be affected when the parent brand experiences problems during business operations. Therefore, an operational system needs to be stable and tight from the start. A franchise brand with a loose and unstable operational system will affect the entire system.
So the Question Is: Should You Run a Coffee Franchise or Not?
In reality, the decision between running a coffee franchise or opening an independent coffee shop depends on personal choice and the risk tolerance of investors. If you prefer a business model with an already successful brand and don’t mind high investment, then a coffee franchise might be an ideal startup method. But if you want creativity and innovation for your coffee shop and are ready to overcome challenges, then building a brand from scratch might be a suitable choice.
Experience in Successfully Opening a Coffee Franchise
1. Choosing a Coffee Franchise Brand
When deciding to partner with a franchise brand, the most important thing is to conduct thorough research on the partner and ensure they align with your long-term business goals. When considering a coffee franchise brand, you need to consider the following factors:
Franchise Fee
The franchise fee is a one-time payment you must pay to the franchisor to join the franchise system. This is a necessary initial fee for franchise operations, including training, opening support, advertising, and some other costs. When choosing a franchise partner, you should thoroughly research the upfront franchise fee as well as all fees you’ll have to pay over the term of the agreement.
Earning Potential
According to Item 19 published based on the Franchise Disclosure Document (FDD), a document disclosing information about the franchisor and franchise system, the franchisor will disclose accurate information about financial figures to the franchisee. This section is called “Financial Representations,” which includes revenue figures compiled and reported from all franchise locations of the previous fiscal year. This information will help you clearly understand the overall financial situation of the business.
Training and Support Program
To choose a reputable and suitable franchise brand, you should consider the support and training programs that the organization provides. It must be a comprehensive training program that helps you thoroughly learn about operational processes, management, advertising campaigns, marketing… before doing business. Additionally, you should also consider companies that will be ready to support or guide you whenever you enter into operations.
Brand Recognition (Reputation)
This is one of the important factors you need to consider when choosing a coffee franchise brand. Specifically, you need to ask questions like: What do customers say about that brand? In the general market, are the reviews about the brand entirely positive, what is its current coverage… In summary, before signing a franchise contract, you need to thoroughly research whether that brand leaves a “good image” with the public.
2. Focus on Product Quality
Franchisees need to pay attention to product quality control. Even when there are many choices from the franchisor, you need to ensure the quality of drinks and food before bringing them to your customers. To ensure drinks in the shop always maintain quality, you need to pay attention to selecting raw materials that ensure safety and have clear origins, invest in machinery and equipment, understand brewing formulas, and accurately measure raw materials.
3. Consider Contract Terms Issues
When considering a coffee franchise business, it’s important that you clearly understand and carefully review issues related to contract terms. Accordingly, some basic conditions that franchisees need to clarify include:
- Regarding Territory: The brand franchisor sets limitations on the area and geography that the franchisee must follow.
- Initial Fees: The franchisor must disclose all fees to the franchisee.
- Monthly Fees: Hidden or non-transparent fees can be a source of future disputes. Therefore, the franchisor must clarify all fees to the franchisee.
- Restrictions on Products and Services: The franchisee can only provide products/services that have been commercially franchised.
- Terms regarding contract renewal and termination need to be clarified.
About Hello 5 Coffee – Your Premium Vietnamese Coffee Partner
While franchising offers many opportunities in the American coffee market, the foundation of any successful coffee business lies in one critical element: exceptional coffee quality.
At Hello 5 Coffee, we specialize in wholesale and export of premium Vietnamese coffee beans that can elevate any coffee business—whether franchise or independent. Vietnam is the world’s second-largest coffee producer, and our carefully sourced Arabica and Robusta beans deliver the rich, distinctive flavors that American coffee lovers increasingly seek.
Read more: 18 Unique and Most Practical Coffee Shop Ideas for Today
Why Hello 5 Coffee?
- Premium Quality: We work directly with sustainable farms in Vietnam’s Central Highlands, ensuring only the finest beans reach your business
- Competitive Wholesale Pricing: Our direct sourcing model means better margins for your coffee shop
- Consistent Supply: Reliable export logistics and quality control guarantee your business never runs short
- Unique Flavor Profile: Vietnamese coffee offers a distinctive taste that helps differentiate your brand in a crowded market
Whether you’re considering a franchise opportunity or building your own independent coffee brand, the quality of your beans will determine your success. Many successful American coffee shops are discovering that Vietnamese coffee offers an authentic, premium alternative to traditional coffee sources—at a price point that protects your bottom line.
Ready to explore how Hello 5 Coffee can support your coffee business? Contact us today to request samples and discover why more American coffee entrepreneurs are choosing Vietnamese beans for their ventures.
